SOUTH AFRICA – In a voluntary trading update concerning its operational performance for the first quarter of the 2024 financial year, JSE-listed packaging company Nampak revealed that reduced foreign exchange (forex) losses had contributed to an improvement in its operating profit.
During the three months ending December 31, 2023, Bevcan SA and DivFood demonstrated notable operational and trading performance enhancements, driven by margin management, cost reduction, and efficiency gains.
Nampak noted improved profitability within its South African Metals operations, attributing this success to cost and efficiency improvements within Bevcan and indicating encouragingly steady beverage can volumes despite restrained consumer spending.
Furthermore, progress remains on track regarding the installation of incremental 500 ml capacity at Bevcan Springs, slated for commissioning ahead of schedule and within budget.
This strategic capital project is poised to facilitate volume growth, aligning seamlessly with the evolution towards Nampak Metals.
However, despite these advancements, Nampak experienced muted turnover growth in South Africa, primarily due to sustained macro-economic challenges, including port congestion, early and extended customer factory closures, and slower-than-anticipated consumer demand, exacerbated by market inventory surpluses.
Nevertheless, the company anticipates demand normalization in the second quarter as customers replenish their inventory holdings.
The demand for canned goods persists positively, particularly within the fish, infant food, and fruit categories, with the fruit season yielding favorable crop results.
The turnaround plan for DivFood surpasses expectations, with anticipated profitability improvements for the fiscal year.
Across Nampak, planned cost and efficiency savings were achieved in line with previous guidance, although discussions with labor representatives to curb labor costs are underway. Despite seasonal cash flow fluctuations, the company anticipates a return to normalized working capital levels by the end of the first half of the fiscal year.
Regarding its plastics and paper division, Nampak faced ongoing turbulence. While plastic closure sales remained stable, demand for drums, bottles, and tubes declined year-over-year.
Similarly, in the paper segment, reduced demand for conical and PurePak cartons in South Africa and foreign exchange losses in Zambia and Malawi tempered performance, while operations in Zimbabwe continued to demonstrate resilience in local currency.
Nampak concluded several smaller disposals, utilizing proceeds to repay debt in line with restructured lender agreements.
The company remains committed to meeting its repayment obligations, with progress evident through the reduction of comparable net debt levels during the quarter.
Moreover, economic challenges persist in Nigeria and Angola, impacting beverage can demand and currency markets.
As the company navigates these complexities, it looks forward to the appointment of Andre van der Veen as chairperson following Peter Surgey’s departure after the annual general meeting.
Looking ahead, Nampak anticipates releasing its interim results for the six months ending March 31 around May 29, with a closed period in effect from March 31 until the interim results release.
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